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Previously, we discussed economic definitions
debatepolitics.com
Now we will discuss taxation.
Today, most developed countries derive a majority of their revenue from the income tax (and payroll tax) which is a tax on labor. There's also sales tas and VAT which tax consumption, capital gains tax which taxes interest (gains from capital), and the wealth and estate taxes which tax idle wealth.
I tend to be a centrist on the issue of taxation. According to republicans, taxes are evil. According to democrats, taxes are necessary. Both are correct. Just about every tax incurs a deadweight loss upon the economy (not including pigovian taxes). This is because of opportunity cost. Money handed over to the government isn't spent on consumption or investment.
But what if it didn't have to be that way?
Of the three factors of production, land appears to be the odd one out. This is because while labor and capital have a potentially unlimited capacity, land is in fixed supply. Although land specifically refers to natural resources, the namesake is fitting because the primary use for nature in most developed countries is real estate. Land has a fixed supply, meaning that any increase in demand will increase land prices. Furthermore, increases in the value of land benefit no one except the landowners, unlike increases in capital and labor. This is because, as mentioned before, land has a fixed supply. If the price is up, that means there's more economic demand for that land. The saying goes that there is no such thing as a free lunch. This isn't true, there is a way to get a free lunch. Typical investment involves putting money into something in the hopes of getting more out. Speculation is a form of investing which does not contribute to the investment itself. An example would be buying something for $10 and selling it for $2000 as a rare collectible. This isn't to say that all forms of speculation are bad. In a volatile commodity market, speculation can help serve to stabilize the price. But it's in the real estate market that we the pernicious effects of speculation because land retained by speculators is not contributing to the economy, at least not as much as it could. This is why an economist by the name of Henry George proposed a land value tax (LVT). The LVT differs from a property tax in that it only taxes the land itself rather than anything on it. This means that decay and improvements won't affect the amount taxed. This is important because more efficiently used land tends to be taxed more. What may affect it is everything happening around it.
Another problem that the LVT may solve (at least if it's implemented at the state or federal level) is the inefficient use of land encouraged by governments. I'm mainly referring to byzantine zoning codes and subsidies to roads. Bad zoning is often the result of local nimbys opposed to new development. What the LVT would do is tax homeowners on very valuable land. All the sudden, the same people who oppose new development will beg local governments to change the codes so that they can sell their land to developers. Furthermore, an LVT would tax roads subsidized by lower levels of government.
One concern is that it will hit rural america like a trainwreck, devastating agriculture. My response to this is that this tax would actually be a tax on suburbia, let me explain. Landowners in downtown areas will be paying the highest taxes but property there, after enough time, will derive a very high percent of their value from the improvements rather than just land (Is the land in Manhattan worth more or are the skyscrapers worth more). Rural property will derive a minimal percent of value from improvements but land value will likewise be low. It will be suburbia which gets hit the hardest. This is because suburban land is used the least efficiently. Property taxes encourage suburban sprawl because property encouraging a higher density is typically taxed more. An LVT would encourage efficient use of the urban core, decreasing demand for suburban housing. This would actually be good for farmers because it would slow down suburban sprawl. It would also be good for small farmers because big farms tend to be more land intensive (small farms have more buildings per unit of land, subjecting them to proeprty taxes).
End of part 1
Understanding economic definitions
This is a barebones definition of how economics works. Supply and demand: The concept of supply and demand is the very foundation of any economy. In a market economy, price is directly correlated with demand and inversely correlated with supply. These three factors lead to a self correcting...
debatepolitics.com
Now we will discuss taxation.
Today, most developed countries derive a majority of their revenue from the income tax (and payroll tax) which is a tax on labor. There's also sales tas and VAT which tax consumption, capital gains tax which taxes interest (gains from capital), and the wealth and estate taxes which tax idle wealth.
I tend to be a centrist on the issue of taxation. According to republicans, taxes are evil. According to democrats, taxes are necessary. Both are correct. Just about every tax incurs a deadweight loss upon the economy (not including pigovian taxes). This is because of opportunity cost. Money handed over to the government isn't spent on consumption or investment.
But what if it didn't have to be that way?
Of the three factors of production, land appears to be the odd one out. This is because while labor and capital have a potentially unlimited capacity, land is in fixed supply. Although land specifically refers to natural resources, the namesake is fitting because the primary use for nature in most developed countries is real estate. Land has a fixed supply, meaning that any increase in demand will increase land prices. Furthermore, increases in the value of land benefit no one except the landowners, unlike increases in capital and labor. This is because, as mentioned before, land has a fixed supply. If the price is up, that means there's more economic demand for that land. The saying goes that there is no such thing as a free lunch. This isn't true, there is a way to get a free lunch. Typical investment involves putting money into something in the hopes of getting more out. Speculation is a form of investing which does not contribute to the investment itself. An example would be buying something for $10 and selling it for $2000 as a rare collectible. This isn't to say that all forms of speculation are bad. In a volatile commodity market, speculation can help serve to stabilize the price. But it's in the real estate market that we the pernicious effects of speculation because land retained by speculators is not contributing to the economy, at least not as much as it could. This is why an economist by the name of Henry George proposed a land value tax (LVT). The LVT differs from a property tax in that it only taxes the land itself rather than anything on it. This means that decay and improvements won't affect the amount taxed. This is important because more efficiently used land tends to be taxed more. What may affect it is everything happening around it.
Another problem that the LVT may solve (at least if it's implemented at the state or federal level) is the inefficient use of land encouraged by governments. I'm mainly referring to byzantine zoning codes and subsidies to roads. Bad zoning is often the result of local nimbys opposed to new development. What the LVT would do is tax homeowners on very valuable land. All the sudden, the same people who oppose new development will beg local governments to change the codes so that they can sell their land to developers. Furthermore, an LVT would tax roads subsidized by lower levels of government.
One concern is that it will hit rural america like a trainwreck, devastating agriculture. My response to this is that this tax would actually be a tax on suburbia, let me explain. Landowners in downtown areas will be paying the highest taxes but property there, after enough time, will derive a very high percent of their value from the improvements rather than just land (Is the land in Manhattan worth more or are the skyscrapers worth more). Rural property will derive a minimal percent of value from improvements but land value will likewise be low. It will be suburbia which gets hit the hardest. This is because suburban land is used the least efficiently. Property taxes encourage suburban sprawl because property encouraging a higher density is typically taxed more. An LVT would encourage efficient use of the urban core, decreasing demand for suburban housing. This would actually be good for farmers because it would slow down suburban sprawl. It would also be good for small farmers because big farms tend to be more land intensive (small farms have more buildings per unit of land, subjecting them to proeprty taxes).
End of part 1
